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Groups Seek Senate Review of Universal-EMI Deal

By Ben Sisario April 26, 2012 5:49 pmApril 26, 2012 5:49 pm

6:34 p.m. | Updated Opponents of the Universal Music Group’s $1.9 billion bid for EMI’s record labels are asking the Senate Judiciary subcommittee on antitrust issues to examine the deal, raising the possibility of Senate hearings.

On Thursday, Public Knowledge, a digital rights group, and the Consumer Federation of America sent a nine-page letter to Senators Herb Kohl and Michael S. Lee of the subcommittee, outlining their objections to the deal. Universal, already the largest music company with about 30 percent share of the global recordings market, would have more than 40 percent after the deal, according to most industry estimates.

The letter argues — as Public Knowledge and others have contended in earlier complaints — that Universal’s expanded market share would stifle competition in digital music. But it also takes the novel tack of comparing the situation to the Justice Department’s recent lawsuit charging Apple and five major publishers with collusion in setting the price of e-books.
“If five companies with a market share of less than 50 percent pose a threat to nascent competition from digital distribution models,” the letter says, referring to the e-books case, “does one company with a market share above 40 percent pose a similar threat?”

In a statement, Universal countered several of the letter’s points, most strongly the e-books analogy.

“C.F.A.’s effort to compare this case to the government’s e-books case completely misunderstands the law,” Universal’s statement said. “The e-books case is about an alleged illegal price-fixing conspiracy. Market shares don’t matter in a case like that — it’s just as illegal for two tiny local bookstores to fix prices as it is for giant publishing companies. The law governing mergers is totally different, and most mergers, like this one, are ultimately found to be beneficial to competition and consumers.”

Universal’s proposed deal is one of two reached by Citigroup in November to split EMI; Sony is leading an investment group in a $2.2 billion bid for EMI’s music publishing assets. In the United States, they are under review by the Federal Trade Commission. The European Commission is investigating Universal’s deal, and last week it approved Sony’s publishing deal with some concessions.

In addition to Public Knowledge and the Consumer Federation, artist advocates and independent music groups have opposed the EMI deals. This month, Universal gained surprising advocates in two powerful unions, the American Federation of Musicians and SAG-AFTRA, which both wrote to the F.T.C. endorsing the merger. The International Federation of Musicians, however, has opposed the deal.

A spokeswoman for Senator Kohl, a Democrat of Wisconsin who is the chairman of the antitrust subcommittee, said that the senator’s staff had reached out to stakeholders in the issue but had made no decision about whether to take action on the issue.

Senator Lee, a Republican from Utah who is the ranking minority member of the committee, said in a statement: “Technological advances have led to much evolution in the recorded music industry. This transaction deserves careful review to understand the myriad forces affecting competition among record labels and to ensure opportunities for innovation and new digital distribution models.”